Self-employed consultants may face tax implications in 2019
NATP advises opening separate business bank account to track deductible expenses
APPLETON, Wis. - March 22, 2019 - PRLog -- Picking up a second job to supplement household income is common. Many Americans are choosing to become consultants that visit homes to sell make-up, jewelry, candles, kitchen utensils and food products. Some may not realize the tax implications of becoming a sole proprietor and what they need to do to file taxes.
Conducting business as a sole proprietor is one of the simplest forms of operation. It's easy to start a business operated as a sole proprietorship and equally as easy to discontinue. Your first step when starting a business is to open a separate business checking account. It will be easier to track your deductible expenses if they are not commingled with your personal expenses. If you incurred expenses prior to opening your business, keep them separate from your other expenses. Special tax treatment applies to startup expenses.
It is important to keep track of your mileage, as it may be eligible for deduction. If you are self-employed and maintain an eligible office in your home, you can deduct the mileage to and from your client/customer's place of business, as well as between jobs.
There are two ways to calculate your auto deductions: the standard mileage rate or actual expenses. The standard mileage rate is the easier method and can be calculated by multiplying total mileage by the current rate ($.535 for 2017 and $.545 for 2018). The actual expense method is exactly that, recording the actual expenses such as the cost of gas, oil, insurance, repairs, maintenance, tires, washing, licenses and depreciation. This method requires you to keep very detailed records and if you use your car for personal and business purposes, you'll have to divide the expenses between the personal and business portion.
The IRS allows self-employed taxpayers to claim a deduction for home-based business expenses if they meet certain requirements. They must use the home office regularly and exclusively:
This article contains general tax information for taxpayers. Each tax situation may be different, so do not rely upon this information as your sole source of authority. The National Association of Tax Professionals (NATP) advises working with a tax expert in your area who keeps current on tax law changes and is also an NATP member.
To learn more about NATP or find a tax professional in your area, visit www.natptax.com.
NATP is the largest association dedicated to equipping tax professionals with the resources, connections and education they need to provide the highest level of service to their clients. NATP is comprised of more than 22,000 leading tax professionals who believe in a superior standard of ethics and exemplify professional excellence. Members rely on NATP to deliver professional connections, content expertise and advocacy that provides them with the support they need to best serve their clients. The organization welcomes all tax professionals in their quest to continually meet the needs of the public, no matter where they are in their careers. The NATP headquarters is located in Appleton, WI. To learn more, visit www.natptax.com.